Correlation between Bitcoin and S&P 500 reaches almost 50%. Bearish signal?

Charlie Taylor

Bitcoin and traditional financial markets have been highly correlated over the past two months. This was clearly demonstrated in recent weeks, when the cryptocurrency followed the stock market closely. According to data from Skew, the perceived correlation between the price of Bitcoin and the S&P 500 index peaked at 5 months.Bitcoin – Correlation carried out S&P 500. Source: SkewThere are many reasons why this may occur, but perhaps the most obvious is the involvement of institutional investors with cryptocurrencies. On several occasions, it has been reported that institutional interest in the asset class is increasing as large companies flooded the market. Grayscale, which is one of the main ways for institutional investors to gain exposure to BTC prices without having to worry about custody, saw the value of assets under management skyrocket in recent months.


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The crash of last March

In March last year, the global markets underwent a strong correction due to the uncertainties caused by the beginning of the pandemic. During the month, virtually all major markets, including stocks, bitcoin and gold had significant declines, with bitcoin falling more than 50% in the period, but crypto recovered its value in just over a month. In comparison, the SP500 took about 5 months to recover from the level before the fall. The trigger for the recent fall in the markets was the increase in yields on government bonds, where investors favored companies that would benefit from a more economic recovery. wide for the rest of the year. The speaker on the subject was Peter Tuz, president of Chase Investment Counsel, who said:

Rates are important. At 1.5%, the yield is comparable to the S&P 500 dividend yield. (…) And there is no 10-year capital risk (..). Suddenly, this (bonds) is competitive with stocks.

Macroeconomic factors

The US House approved President Biden's $ 1.9 trillion stimulus bill last week. The bill went to the Senate to vote and, if successful, will be yet another massive injection of money into the economy. And if bitcoin remains correlated to the stock market, it should favor its price as well. In the same way, the increase in the monetary base tends to increase the price of commodities, with that, gold, silver and bitcoin should strengthen in this scenario.Read more: Inmates retained more value with cigarettes than Brazilians with real

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